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LR2 Floating Storage Development

June 24, 2022

The LR2 market has been strengthening over the course of the last two weeks, with the benchmark TC1 AG/Japan trade swinging from a low WS 185 to a peak of WS 330 and closing the current week at WS 290.  The fundamentals in this market remain positive, considering the rising demand for oil products (combined with the sanctioning of Russian cargos by western countries), but also the increased expected supply in the Middle East. In fact, we expect about 743,000 b/d of added refining capacity in the region this year, with the 615,000 b/d Al ...

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Crude Balance Revisions – Impact of Policy Shifts

June 17, 2022

The latest revision of global crude balance data revealed a higher-than-expected buildup for the month of May, with a little over 800,000 b/d (Figure 1).  However, looking at the bigger picture we note the inventory buildup for the first half of 2022 is expected to reach 350,000 b/d, a relatively small number considering the rallying global demand at the refinery level.  Going forward, the expectation is for demand to continue to outpace supply, leading to further de-stocking and likely contributing to sustained weakness in the VLCC market.

 

There were two policy shifts that could have a ...

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Emerging East and West CPP Trends

June 10, 2022

In the West of Suez markets, product demand in the Caribbean and Latin America regions has been increasing to pre-pandemic levels, exacerbated by factors such as severe droughts in Brazil that have necessitated importing higher volumes of gasoil for power generation.  With gasoil balances in Europe tightening after the ceasing of Russian imports, the US Gulf region refining system emerged as the “natural” market for those requirements.  Combined with incidents of inclement weather in the Gulf the past two months, freight rates for MR2 tankers gained, and for the most part retained strength with the USG/CARIBS MR2 trade gaining ...

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Cargo Switchover Activity Supporting LR2 Rates

June 3, 2022

Cargo switchover activity has been on the rise lately, with a clear trend forming among coated Aframax/LR2 owners in switching their tankers to trading dirty after the volatility caused by the war in Ukraine and risk premiums boosted rates.  Looking at past statistics, there has been some cyclicality on cargo switchovers that has affected Aframax/LR2 market accordingly, but since Q3 2021 we have observed a strong uptick in LR2s beginning to trade dirty, given the low earnings environment.

With the start of the war in Ukraine and subsequent sanctioning of Russian oil (official and self-sanctions), Aframaxes found opportunity ...

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Venezuela: Will Sanctions Relief Boost Market?

May 20, 2022

This week, news about the US government exploring possible sanctions relief scenarios for Venezuela became a hot topic, especially as inflationary pressures have sent gas prices at the pump soaring.  While some analysts claim this, for now, could only be an incentive to bring the Maduro government back to the negotiating table, it is worth exploring the potential impact on the crude tanker markets.

Current Venezuela crude oil production stands at about 650,000 b/d according to the latest data from JBC Energy (Figure 1).  This figure is likely to trend upwards even without sanctions relief, especially after some ...

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